Legislature can fix property tax without breaking South Bend

February 24, 2008|STEPHEN J. LUECKE

Our property taxes pay for important services in our community: police and fire protection, parks, libraries and schools, economic development and street repairs. But we have become too reliant on property taxes. We need a broader, flexible funding stream for local government which is stable, accountable and equitable. It must ensure an adequate source of revenue to support key services -- and any change to the current system should be revenue neutral so there is no windfall gain, nor catastrophic loss of revenue. The current property tax crisis is the result of several actions: the initial court-ordered reassessment which shifted taxes from business to residential; the implementation of trending to better reflect market value; caps on Property Tax Replacement Credits from the state; and the abolition of the inventory tax. These were well-intentioned efforts that had unexpected results. We need to make sure that the current rush to fix property taxes does not have unintended consequences that harm our communities. State lawmakers have been focused on House Bill 1001, Gov. Mitch Daniels' plan for tax caps. This plan is really a tax shift, not a tax cut. It imposes an additional 1 percent sales tax statewide and will force local governments to enact local income taxes to replace lost revenue. The tax caps of 1 percent for homeowners, 2 percent for other residential property and 3 percent for business property would cause the taxing units in St. Joseph County to lose $64.5 million per year! Revenue for the city of South Bend would shrink by $26.8 million. That is more than one-third of our property tax revenue! These dollars support critical services. If these lost revenues are not replaced, we face dire consequences. We would lose almost 50 percent of the funds we use for economic development, funds that have helped to bring more than a half-billion dollars of private investment and thousands of new jobs to South Bend. We would be in default on three bonds. Other property tax funds would be cut by over 25 percent, resulting in: - 65 fewer police officers, and 15 fewer civilians in the police department. - 7 fewer personnel in our 911 communications center. - 62 fewer firefighters, and 2 fewer office support personnel. That's a total loss of 151 total public safety personnel. In addition there would be 17 fewer employees in general government, seven fewer staff for Code Enforcement and Animal Control, 16 fewer personnel for the Street Department/Traffic & Lighting, four fewer engineers and support staff (losing the cost savings of doing work in-house), and 30 fewer Parks and Recreation Department employees. Most likely this would mean closing our zoo and greenhouse. These cuts are not just trimming fat; they are cutting muscle and bone. We have worked hard to provide efficient and effective services for our taxpayers. I have included a chart showing the significant cost savings we have achieved. We cannot lose more than 33 percent of our levy without cutting essential functions. Replacement funds are necessary to provide the basic services that our community demands. HB 1001 does provide for a local option income tax to replace revenue lost to the property tax caps. In St. Joseph County, it would take 1.2 percent additional income tax to replace lost property taxes for all units of government. If the state does not replace the revenues lost to the property tax caps, we will need to enact this local tax to support public safety, parks, economic development and quality of life in South Bend and throughout St. Joseph County. For most residents, property tax savings would be offset by the new sales and income taxes. I am proud of our wonderful city and the quality of life we enjoy. As the regional center for arts and culture, business and finance, health care and education, we provide amenities that serve a population well beyond the borders of St. Joseph County. Despite the downturn in the economy, we had a record year for construction last year -- and I expect even better growth in 2008. It is important to keep moving forward. I strongly favor reducing property taxes, keeping costs down and operating efficiently. I support property tax reform that provides a fair, understandable way of funding basic functions and that does not strangle our community. I will continue to be an advocate for sufficient funds to provide key services. If you support the proposed property tax caps, please contact our legislators and ask them to make sure that sufficient replacement revenues are available to support the services we need in our hometowns. Stephen J. Luecke is mayor of South Bend.